Outsourced Contact Centers – The Service Imperative

At 12 PM a caller contacts a major U.S. airline to make a reservation and is connected to India. At the same time, a cell phone customer has a question about their new wireless plan and is connected to the Philippines.

Having your customer service call answered by someone in another country is one of the fastest growing and controversial practices in the business world.

Contact centers are the human backbone of “outsourcing,” the business practice of an outside specialist organization and/or employees taking over a service to allow the company to focus on its core business. Outsourcing has been on the rise for the past decade and that growth is projected to continue. Between 2000 and 2005, the number of outsourcing providers will double, according to a Gartner Group estimate. The Meta Group estimates that by 2010, of the 22 core Human Resources processes, large and complex middle market companies will outsource more than 50% of these processes to differentiated vendors. A key finding in all studies is the need for functionality supported by sophistication in Contact Center operations.

 

Offshoring….Increasing the Odds

In recent years, a new core competency has emerged among outsourcing vendors: “offshoring,” or the practice of handling business processes like outsourced services in countries such as Ireland, Chile, India or the Philippines. Offshoring allows U.S. organizations to leverage the costs associated with a less expensive labor pool without sacrificing quality. As an example, the October 18th 2003 Business Week indicated that GE Capital, with 1,800 employees in India, saves about $340M a year by outsourcing 700 tasks to Indian specialists.

A recent survey by the Management Consultancies Association revealed that MCA members anticipate that offshore outsourcing will grow by 25% over the next 5 years. A 2002 survey by Gartner Dataquest Inc. showed that of responding companies who planned to increase their budgets for offshoring in 2003, nearly 70% expected their offshoring budgets to be 1 ½ times their 2002 levels. The most frequently mentioned offshoring destination, India is aggressively training people to meet the “knowledge demand” by doubling their number of college graduates by 2010. During the same period there will be a projected 50% increase in the number of engineering schools of higher learning. 60 Minutes, on Jan. 11th did a segment on the impact of Contact Centers on the Indian economy.

Offshoring is not for every company. Some do not have the financial wherewithal to set up an operation thousands of miles away, while others are

not willing to be “early adopters” of an offshoring strategy. A recent report by Forrester Research showed that 60% of the Fortune 1,000 companies in the United States have not embraced offshored outsourcing.

 

Forrester, an independent technology research company, said that migration to offshoring usually involves a 2-to-5-year process. Other companies face restrictions on where they can locate their employees because of government contracts or union agreements. Some companies see offshoring as impractical if their business depends upon call center employees having local knowledge or understanding of accents and culture.

The Economist magazine recently reported that offshored business is predominantly English speaking, specifically U.S. and British companies that outsource some of their internal operations, such as back-office processes and routine telephone call center inquiries. The outsourcing providers are located in Ireland, Canada and South Africa, but primarily India, which The Economist says appears to be the most attractive offshoring destination for some time.

 

Contact Center Operations….the Challenge to Overcome for Human Resources

Whether a customer’s or employee’s calls are answered by someone located in Indiana or India, Mellon’s Human Resources and Investor Solutions predicts that the definition of vendor excellence will be the linkage between the web-enabled employee self service capabilities and customer focused contact centers.

These complimentary capabilities will be the cornerstone of the employee “customer experience” for services provided by the Human Resources function.

We maintain that while outsourcing selected Human Resources processes is an economic necessity, for vendors the challenge to provide outstanding employee “customer service” will only grow. As the Management Consultancies Association survey noted, 60% of its members believe that reliability of service is the most critical factor to an outsourcing operation’s success.

In a weak economy, the need for good customer service only increases. Consumers are more careful with their disposable income, tensions are high on both sides as people struggle to keep their jobs and companies are in fierce competition to retain their customer base. It is counter-intuitive – and incorrect – to assume that the contact centers of outsourcing providers can ignore this aspect of customer satisfaction. The Internet provides a fast, easy method of comparison-shopping as well as another layer of customer service complexity. For contact centers, simply hiring to fill seats and answer phones will no longer meet the needs of this economy’s customers. Their standards are escalating!

What does this mean to contact center operations? It means redefining the type of employees hired, reinforcing an attitude of customer service, developing new strategies for attracting and retaining these employees and changing the corporate perception of the value of the call center and its staff.

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The Information Technology Perfect Storm

The concept of workforce planning has been a core Information Technology (IT) initiative for quite some time. For the most part, it is a mathematical or formulamatic exercise focused on predicted labor growth minus anticipated departures equals hiring needs. Oftentimes there are bells and whistles in the process: but if we are being candid, the above, for the most part, constitutes a workforce plan.

 

This calculation was easier to do over the last four years during the recession, but as you will see, the ability to create a meaningful workforce plan is becoming a very difficult challenge for IT managers.  The complexity is derived from the reality that as we move further into the new millennium, we are encountering a labor market “perfect storm.” This phenomenon can be attributed directly to the shifting demographics of both the domestic and global workforce, post-recession increase in enterprise growth opportunities, and diminishing levels of employee commitment. The storm becomes even more intensified due to the ever-increasing emphasis on globalization coupled with the demand that IT professionals be “innovative” while staying within budget.

 

To read the rest of this artilce, click here

 

 

 

 

 

 

The Human Capital Perfect Storm-The Necessity for Comprehensive Workforce Planning

The concept of workforce planning has been a core human resources capability for quite some time.  For the most part it is a mathematical or formulamatic exercise focused on predicted labor growth minus anticipated departures equals hiring needs.  Oftentimes there are bells and whistles in the process: but if we are being candid, the above for the most part constitutes a workforce plan.

 

This calculation was easier to do over the last four years during the recession, but as you will see the ability to create a meaningful workforce plan is becoming a very difficult challenge for human resource practitioners.

 

The complexity is derived from the reality that as we move further into the millennium we are encountering the human capital Perfect Storm for the following reasons:

  • The shifting demographics of both the domestic and global workforce;
  • The post-recession increase in enterprise growth opportunity;
  • The diminished and diminishing levels of employee commitment;
  • The intensified emphasis on globalization; and
  • The demand that the human resources function be “innovative” while controlling cost remains unabated.

 

Test Your Workforce Planning

 

Below are a set of numbers, all of which are relevant to human resources and workforce planning.

 

For those of you who like to read the last page of a book before the first page, I appreciate your forbearance, as I would encourage all of you to think about the number rather than skipping to the answer.

1)  5.0%

2)  55-65 years of age

3)  35-45 years of age

4)  -39%

5)  1,000 émigré’s

6)  600,000 vs. 75,000

7)  1 worker for every 3 retiree’s

8)  2 for the family and one for the country

 

A Commercial Break

 

As human resources practitioners are loath to take direction and in the hopes that no one skipped ahead, I thought it useful to insert a framework that helps reinforce the workforce planning concept.

 

 

The research, management consulting, and education firm,  NGenera, through its Research Driven Advisory services, has conducted extensive research on the phenomenon of shifting demographics and the implications for the emerging labor market.  This research led to the granting of the McKinsey Award for the Harvard Business Review article It Is Time to Retire Retirement and the recently published book Workforce Crisis.  

 

Based on this research,  NGenera holds the point of view (as illustrated in the above model) that workforce planning needs to be elevated from an activity or at best a sub-process to a core human resources process to insure enterprise competitive advantage.

 

Finally the Answers!

 

To reinforce the hypothesis that the workforce planning process is now essential, I would ask you to think about how many of the numbers, all of which have been in the HR or business press since April 2006, you actually knew.

 

1)  5.0% was the domestic unemployment rate in April.  To reinforce the emerging labor shortage as a concern, during the recession in the early 90’s the unemployment rate peaked at 9.7% vs. this recession at 6.4%.

2)  55-65 years of age is the fastest growing segment of the workforce.  This is at a time when most organizations perceive an incumbent at age 50 to be on the “back 9” of their career.  It is becoming commonplace for professionals to take early retirement to work full time at a different company or to start a business.

3)  35-45 years of age is the element of the workforce that is shrinking.  This presents challenges for retention, career progression, retirement benefits, and development to say nothing about hiring.

4)  -39% is the drop in computer science graduates since 2000.  This obviously has been influenced by the burst of the “tech bubble” but is still of concern.

5)  1,000 émigrés per month is the number of skilled workers who are leaving the United States, most to return to their home of origin.

6)  600,000 vs. 75,000 is the difference in near term engineering and computer science graduates between China/India and the US.

7)  1 worker for every 3 retirees is the prediction for Western Europe, which has a generous social benefit posture.

8)  2 for the family and 1 for the country is an advertisement on Australian TV that encourages larger families.   It is a manifestation that as a society there is concern about the shifting demographics.

 

These numbers should act as a not so gentle prod that it is now necessary to have a more generous interpretation of workforce planning and a plan!

 

 

The Elements of the “New” Workforce Plan

 

The core elements of the new workforce plan are focused on having the right person in the right job at the right time.

 

To do so it is necessary to expand the dimensions of the input to workforce plan creation to encompass at least the following elements.

  • A comprehensive enterprise demographic plan….develop scenarios based upon growth and penetration factors….complicate the current state exercise!
  • A breakdown of the population based on organization affiliation drivers vs. employee satisfaction – i.e., the same person who rates health care as good to excellent may not perceive it as a priority in terms of determinants of employee engagement.
  • Creation of as much flexibility in terms of employment arrangements-phase down, part-time, virtual, etc., without penalty in terms of career progression, benefits, etc.,.
  • Re-thought leadership development and career progression systems.  In China, 60 is young to be on the fast track.  In the US, with the fastest growing segment of the workforce being 55-65 and the second fastest being 65+, it is time to challenge the existing concepts of age.
  • Development of an employee brand that can be taken seriously and does not prompt comments about lack of sincerity.

 

The need for workforce planning is self-evident in the abstract.  The sense of urgency to expand the definition for planning and to actually create the approach should be equally self-evident.

 

 

Tom Casey is a Vice President and leader of the Human Capital practice with.  He can be contacted at tcasey@nGenera.com.

 

 

Global Workforce Demographics – Part 3 of 4: Russia’s Workforce

This is Part Three of a four part blog on Global Demographics.  Here is the link to:

Part One – Global Wokforce Demographics

Part Two – Japan’s Workdorce Demographics

 

Russian Federation’s Workforce Demographics

At the other end of the spectrum is the Russian Federation who’s 73 million workforce has just 9.7% of its workers 55 and older.  While in most developed countries, the fastest growing workforce segment is 55 and older, in Russia, their fastest growing segment is the 45 to 54 year olds.  This segment totals 26% of its workforce and is almost 3.5 times the size of the 55 and older segment. 

Russia’s workforce demographics are being shaped by an alarming phenomenon.  Russia is in the midst of a population decline.  Its population, currently 142 million, has been steadily declining since 1992. 

Russia’s population decline is linked to two intertwined trends:

  • Increased mortality rate among young males, due to suicides, alcohol poisoning, murder and traffic accidents
  • Decline in birth rates.  Presently, rates are 1.1 births per female.  2.4 births is the general rule to sustain a population

The influence of these trends on Russia’s workforce makes it susceptible to two different types of risk:  Knowledge Loss and Vacancy.

Knowledge Loss risk is the potential “brain drain” or intellectual capital decline to an organization while Vacancy risk is the potential that an open job will be unstaffed. 

Three reasons support an assessment that Russia has higher levels of Knowledge Loss and Vacancy risks:

·        The 55 and older segment often associated with experiential knowledge makes up less than 10% of the workforce.

·        The average life expectancy for a Russian male is 59 years.

·        25% of Russia’s workforce is between 45 and 54 years.  While this is the fastest growing segment of Russia’s workforce, many are also within 10 years of the average life expectancy.

The conclusion is that the supply of workers who primarily hold supervisory, managerial or seniority positions in an organization is shrinking and directly contributes to higher levels of Knowledge Loss and Vacancy risks.

Foreign workers are aware of Russia’s population decline and job vacancies and view it as an opportunity.  Russia has the second largest number of international migrants but concerns exists that this is only a short term solution

Since Russia’s late 1990’s financial crisis, its economy has been on a growth trajectory.  High oil prices, consumer demand and capital investments have contributed to growth that is averaging 7%, annually.  Like Japan, Russia has a threat to its economic expansions, and while, like Japan, it is demographic related, its root cause is much different. 

Global Workforce Demographics – Part 2 of 4: Japan’s Workforce

This is Part Two of a four part blog on Global Workforce Demographics.  Here is the link to Part One

 Japan’s Workforce Demographics

Japan is a country with 66 million workers, yet 1 in 4 is 55 and older.  In the US that figure is 1 in 6.  Out of the 13 countries studied, Japan has the highest percentage of aging workers.  Like many other developed countries, trends in life expectancies and birth rates have taken their toll on the Japanese workforce.  Because of the aging population and the reduced number of births, Japan is very exposed to Age and Retirement risks.

Age and Retirement risks each reflect an aging workforce but generate different outcomes.  Age risk is the potential productivity loss associated with an older worker while Retirement risk is the potential loss of an employee to retirement. 

For Age risk to become a “real” issue for corporate executives depends on a combination of the job and worker.  For certain manual occupations, an aging worker will become less productive.  Examples are agriculture and construction workers.  Yet, the same worker in a different job, say inside-sales could display an increase in productivity.  The point is that while Age risk is less certain and in some instances, difficult to measure, its threat at a macro-economic level is real.

Three reasons support an assessment that Japan has higher levels of Age and Retirement risks:

  • 26% of its workforce is 55 years and older.
  • In the next five years, it is probable that the percent of 55 and older workers will grow to between 30% to 35% of Japan’s workforce.
  • 30% of its economy, as measured by GDP, comes from physical occupations in agriculture, fishing, mining, manufacturing and construction.  These industries, by their nature have high exposures to Age risks.  By comparison, the US economy produces 22% of its GDP from these same industries.

Since 2002, Japan has enjoyed  a return to economic growth that it had not experienced since the late 80’s, yet, unmitigated Age and Retirement risks loom which could contribute to an end to their economic recovery.

Here is the link to Part 3

Parts Three and Four of this Blog are in Process and will be posted soon.   

Global Workforce Demographics – Part 1 of 4

Over 75% of the world’s goods and services are produced by a handful of countries.  With all the chatter around demographic trends and the talent crisis, I thought it would be interesting to examine age demographics for these countries and determine risks to our global economy.

  Analysis Scope

The World Bank lists 14 countries producing over 75% of the world’s goods and services in 2006, measured by GPD.

  1. United States
  2. Japan
  3. Germany
  4. China
  5. UK
  6. France
  7. Italy
  8. Canada
  9. Spain
  10. Brazil
  11. Russian Federation
  12. India
  13. South Korea
  14. Mexico

  

While the European Union is not a country, it does have economic clout and so I added it to the list and collected data on its 27 member countries.  Including the EU gave us 15 “countries” in the study.

Labor market data for this exercise was provided by the International Labour Organization which has 2005 workforce by age demographics for all countries, but India and China.  Therefore, these countries were excluded from the analysis, bringing the total number of countries to 13.

The analysis revealed that 55 and older workers make-up about 14% of the workforce, in the 13 countries on average.  By comparison, the same figure is 16% for the US. [data table

Of the 13 countries, two jumped-out.  Japan, because 26% of its workforce is 55 and older, and Russia, because less than 10% of its workforce is 55 and older.

Here is the link to Part 2

Book Review: Understanding Statistics – A Guide for I/O Psychologist and Human Resource Professional

Workforce planning requires knowledge of many domains.  One that is frequently over looked is statistics.  I have read several books on the topic and feel that Understanding Statistics – A Guide for I/O Psychologist and Human Resource Professional by Aamodt, Surrette and Cohen is an good starting point for those needing a refresher. 

Workforce planning describes and analyzes an organization’s employee population in terms of retirement, age, hard-to-fill and turnover data.  Performing these activities for large volumes of data, such as a 10,000 employee workforce is done using statistics.  Yet, most business managers have not calculated r-squared since their sophomore year in college. 

Many managers require a refresher in statistics to be effective in workforce planning.  The book by Aamodt, Surrette and Chohen does just that.  While many books exist on the subject, this book integrates statistics with employee population data, making its descriptions and examples relevant to workforce planning.  While reading this book, you won’t need to figure out how a concept applied to a random sample of 75 Ford F-150 trucks relates to an employee population.

The book addresses the following:

  1. The concept of statistical analysis
  2. Statistics that describe
  3. Statistics that test differences between groups
  4. Understanding correlation
  5. Understanding regression
  6. Met-Analysis
  7. Factor Analysis

  

If you’re looking for a quick overview of statistics that uses employee population data as examples, then this book is for you.